Unilever Indonesia (UNVR IJ)

Topline Momentum Continues Amid Cost Headwinds

• UNVR’s topline recovery continued in 3Q26, driven by stronger volume and selective ASP hikes, amid ongoing cost pressures.
• UNVR continues to prioritize premiumization, while further ASP hikes are planned for 4Q26 and FY27 to offset input cost pressures.
• We cut our FY26-28F earnings est. by 3.4-7.2% and lower TP of Rp1,900; maintain Buy rating on strong vol play & op efficiency. 

Topline recovery continues despite challenging cost environment 

UNVR continued to show encouraging progress in its ongoing business transformation, delivering 7.4% rev growth in 3Q26 (+7.2% yoy in 9M26), primarily driven by volume growth of 6.4%/7% in 3Q26/9M26. ASP growth also turned slightly positive at 0.9%/0.2% in 3Q26/9M26. It has implemented two rounds of selective ASP increase of ~5% in Jun and Aug26 across products with greater exposure to CPO and oil prices, particularly in the home care and skin cleansing segments. Nonetheless, 3Q26 gross margin still contracted to 42.3% due to higher CPO and crude oil prices, and rising logistics costs for outer-island distribution. On positive note, transformation costs remained relatively contained at Rp57bn in 3Q26 (Rp170bn in 1H26) and now mgmt. guides for a 40-50% yoy (30-40% prev.) reduction in FY26, followed by a further decline in FY27, subject to the Foods business separation. We believe these measures should help cushion margin pressure amid rising costs.

Premiumization remains a key focus, with further ASP hikes in the pipeline

Mgmt. reiterated its focus on premiumization, with the premium segment growing nearly 2x faster than the non-premium segment and accounting for 32% of total market mix in Jul26. UNVR also expects to implement further ASP increases in 4Q26 and FY27 to partially offset higher input costs, while maintaining product penetration and market share. Additionally, A&P spending is being increasingly prioritized towards higher-growth premium segments, alongside a reduction in spending on the foods and home care segments. We view this positively as stronger premium mix should support revenue growth and enhance UNVR’s pricing flexibility for further ASP adjustments when needed.

Lowering our est; maintain Buy rating with a lower TP of Rp1,900

We lowered our FY26/27 earnings est by -3.4/-7.2%, reflecting lower gross margin assumptions amid higher input costs, as we expect cost inflation to persist beyond FY26. On EBIT front, we maintain our opex/rev ratio assumptions for FY26F, while lowering them for FY27F on more targeted A&P spending and better operational cost efficiencies. We maintain our Buy rating on the stock with a revised TP of Rp1,900 on our lower forecast and PE multiple target of 18.1x (-0.5sd of 3yr mean). Key risks are weakening in purchasing power, higher volatility in input costs.

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